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Some small business loans are seen as proverbial Swiss Army knives–versatile enough to be used for a wide range of purposes. A prime example of this flexibility is a term loan, which entrepreneurs have used for everything from hiring seasonal staff to getting a new forklift for the warehouse.
Other loans are more targeted to specific purposes. For example, business acquisition loans are named so descriptively that just about anyone could guess what they’re engineered to help small business owners do.
When it comes to funding a startup, both camps offer solid loan options. The common denominator is that these various loan products have lenient qualifying requirements, as startup owners won’t have a business track record to rely on. Their businesses are being created from scratch, limiting the financial data lenders could evaluate to inform their decision.
One of the most popular ways to fund a startup is with an SBA loan. These loans typically offer incredible interest rates and repayment terms. These favorable conditions exist because the Small Business Administration (SBA) guarantees a substantial portion of the loan, lowering the lender’s risk and motivating them to work with you.
Of the various loans offered by the SBA, their 7(a) program is best suited for startups. These loans provide great interest rates, and there aren’t many restrictions on how to use the money (as long as it’s business-related). Most importantly, 7(a) loans are geared toward small business owners who have been turned down for other loans in the past.
Another versatile option is a business credit card. This easy-to-use solution functions nearly the same as your personal cards. And you won’t need any business history because the qualification will depend on your personal finances. As long as you have a credit score of 680 or higher, you should be a strong candidate.
If you want to go with a more targeted funding approach, a non-SBA startup loan can be an excellent way to get the funding you’ll need. This family of loans includes short term loans, equipment financing, lines of credit, and more. The interest rates are typically higher, but that comes with the territory when you’re acquiring debt financing before you have a business history to leverage.
With a startup loan, you can get up to $750,000, and the money can hit your account in as little as 2 weeks. As with SBA 7(a) loans and business credit cards, you can expect a lender to scrutinize your personal finances. They’ll also be keenly interested in your business experience. If you’ve worked in the industry or have at least demonstrated your ability to run a successful business in the past, you’ll stand a much better chance of getting the green light.
The important thing to remember is that you have options when it comes to deciding how to fund your startup. Take your time to find the best financing solution, because it can help determine the course your new business will follow.
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